Alleghany Beats Q2 Earnings on Strong Underwriting Results - Analyst Blog


Alleghany Corporation ( Y ) posted operating earnings of $9.06 per share for the second quarter of 2014, outperforming the Zacks Consensus Estimate of $8.04 by 13%. Results also improved 34% year over year.

Underwriting results at the Reinsurance and Insurance segments were better than the year-ago quarter and this primarily drove the bottom line.

Alleghany Corporation - Earnings Surprise | FindTheBest

Behind the Headlines

Alleghany's top line improved 7.9% year over year to $1.29 billion, largely attributable to the rise in net investment income and other income. The results comfortably exceeded the Zacks Consensus Estimate of $1.19 billion.

Net investment income surged 14% year over year to $114.1 million in the second quarter. This increase reflects an increased allocation of the debt securities portfolio to higher yielding securities, as well as more favorable reinvestment rates.

Total costs and expenses of $1.09 billion increased 3.8% from the year-ago quarter due to rise in commissions, brokerage and other underwriting expenses, along with other operating expenses and corporate administration expense.

Underwriting profit came in at $110.1 million, up 40% from $78.8 million in the year-ago quarter. The upsurge was driven by strong results at both Reinsurance and Insurance segments. Combined ratio improved 260 basis points year over year to 90.0% in the reported quarter, on the back of strong underwriting performance at TransRe and RSUI due to lower cat losses.

Total net premiums written increased 4.4% year over year to $1.20 billion in the reported quarter, resulting from an increase in net premiums written in TransRe. Net premiums written also rose in the insurance segment owing to growth in CapSpecialty and PacificComp, partly offset by a decline at RSUI stemming from increased competition in the property lines of business.

Financial Update

Alleghany exited second-quarter 2014 with cash balance of $419.4 million, down 16% from Dec 31, 2013.

Alleghany's total assets of $23.8 billion increased 2.1% from the 2013-end level.

Total shareholders' equity came in at nearly $7.4 billion as of Jun 30, 2014, up 6.6% from the 2013-end level.

Book value per share increased 9.4% to $451.65 as of Jun 30, 2014 from $412.96 as of Dec 31, 2013.

Share Repurchase Update

Alleghany spent $65.3 million to buy back 0.2 million shares in second-quarter 2014 leaving $81.9 million under its $300 million authorization.

In July, the board of directors of Alleghany approved the company to repurchase additional shares up to approximately of $350.0 million, upon the completion of the previously announced program.

Performances of Other Property and Casualty Insurers

Progressive Corp. ( PGR ) reported second-quarter operating earnings of 45 cents per share, falling short of the Zacks Consensus Estimate by a couple of cents. However, earnings improved 10% year over year.

RLI Corp.'s ( RLI ) second-quarter operating income of 66 cents per share came in line with the Zacks Consensus Estimate. The figure also marked a 4.8% year-over-year increase.

Everest Re Group, Ltd. ( RE ) posted second-quarter operating income of $5.41 per share, lagging the Zacks Consensus Estimate by 6.3%. However, earnings improved 6.1% year over year.

Zacks Rank

Alleghany presently sports a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: RLI , RE , PGR , Y

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